Photo of Bipluv Jhingan

Associate in the Tax Practice at the Mumbai office of Cyril Amarchand Mangaldas. Bipluv specialises in various aspects of direct tax such as corporate tax, restructuring, and funds. He can be reached at bipluv.jhingan@cyrilshroff.com

mplications of the Finance Bill, 2020, on INVITs, REITs and its Unitholders

The Finance Minister, Nirmala Sitharaman, presented the Union Budget 2020-2021 on February 1, 2020 and consequently, introduced the Finance Bill, 2020 (“Bill”) in the Lok Sabha. The Bill comprises the financial proposals, including taxation related proposals, to amend the provisions of the Income-tax Act, 1961 (“Income-tax Act”) for the financial year 2021.

The Income-tax Act comprised provisions in relation to the taxability of, and exemptions available to, infrastructure investment trusts (“InvITs”) and real estate investment trusts (“REITs”, together with “InvITs”, referred to as “business trusts”) registered with the Securities and Exchange Board of India under the Securities Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) or the Securities Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”), respectively.
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  Taxation of REITs in India

 

*An eight-part series covering the commercial and legal considerations of REIT listings in India. Click here to read Part III.

The Government started putting in place a framework for taxation of business trusts even before the regulations governing Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) were notified by the Securities Exchange Board of India (SEBI). This was not without reason – progressive regulations and tax reforms have influenced the progress of REITs globally, with REIT markets witnessing sudden growth spurts in countries such as Singapore and Hong Kong almost immediately following favourable tax amendments.

Closer home, five years and multiple amendments later, the Indian tax regime for REITs is a complex proposition and comes with a wishlist from nearly all stakeholders involved in a typical REIT. With Indian real estate likely to provide investment opportunity worth up to USD 77 bn through REIT-eligible commercial office and retail properties across India’s top seven cities by 2020[1], there can be no better time to look at some of the key issues.
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